Good day, ladies and gentlemen and welcome to the Iteris Fiscal Fourth Quarter and Full Year 2019 Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Todd Kehrli of MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for participating in today's conference call to discuss Iteris' financial results for its 2019 fiscal fourth quarter and full year ended March 31, 2019. Joining us today are Iteris' President and CEO, Mr. Joe Bergera; and the company's CFO, Mr. Andy Schmidt. Following the remarks, we'll open the call for your questions. Before we continue, we'd like to remind all participants that during the course of this call, we may make forward-looking statements regarding future events or the future performance of the company, which statements are based on current information, are subject to change and are not guarantees of future performance. Iteris is not undertaking an obligation to provide updates to these forward-looking statements in the future. Actual results may differ substantially from what is discussed today, and no one should assume that at a later date, the company's comments from today will still be valid. Iteris refers you to the documents that the company files from time to time with the SEC, specifically the company's most recent forms 10-K, 10-Q and 8-K, which contain and identify important risk factors that could cause actual results to differ materially from those that are contained in any of the forward-looking statements. I'd like to remind everyone that you will find a supplementary report of the Q4 and full year financial metrics, as well as a webcast replay of today's call on the Investors section of the company's website at www.iteris.com. Now I'd like to turn the call over to Iteris' President and CEO, Mr. Joe Bergera.

Great. Thank you, Todd, and good afternoon, everyone. And I appreciate you joining us today. As you saw at the close of the market, we issued a press release announcing the financial results for our fiscal fourth quarter and full year ended March 31, 2019. We began the fiscal year 2019 with sizable headwinds from structural changes to two of our largest customer contracts, which temporarily masked a significant underlying demand for our products and services. Needless to say, it was disappointing to watch our revenue decline in the first three quarters of the fiscal year, even while our quarterly net bookings growth reached record levels. Therefore, I'm pleased that we are now able to demonstrate tangible progress in putting these headwinds behind us. In Q4, Iteris reported record fourth quarter total revenue of $26.1 million, which represents a 3% year-over-year increase. Additionally, we secured fourth quarter total net bookings of $24.1 million, representing a 64% increase year-over-year. On a full year basis, our total revenue was $99.1 million. Despite the 4% year-over-year decline in full year revenue, our full year total net bookings of $107.1 million were up 24% year-over-year. I'll provide a brief overview of performance by segment. In Q4, our Transportation Systems segment recognized $12.9 million in revenue, representing a 1% year-over-year decline relative to the same prior year period. For the full year, the segment's revenue was $49.8 million, representing a 9% decrease. The improved fourth quarter results demonstrate the segment's success in converting our historic bookings growth to revenue and retiring the headwind from the change to a large contract with Virginia Department of Transportation or VDOT. That change went into full effect in the second quarter of fiscal year 2019. For the full year, the Transportation Systems segment recorded $56.6 million in net bookings, representing a 49% increase from the same prior year period. The segment's net bookings reflected significant and growing demand for all lines of business, in other words, consulting, managed services, and Software-as-a-Service. Additionally, the segment experienced a significant increase in market penetration in both Texas and Florida, two strategic geographies. Recent notable Transportation Systems bookings include $7.8 million in combined task orders from four different jurisdictions for traffic signal optimization initiatives; $4.7 million in combined task orders to enhance and maintain the nation's connected vehicle reference architecture under a recently awarded contract from the Federal Highway Administration with a total ceiling of $19.5 million; a $3.8 million Software-as-a-Service contract with the Iowa Department of Transportation for our commercial vehicle operations platforms, new international registration and fuel tax compliance service; a software-as-a-service contract with Canada Transport for a nationwide deployment of iPeMS; and contracts with the County of Lee County Florida and the Bay Area Metropolitan Transportation Commission to enhance respective region's readiness for connected and automated vehicles. The significant increase in our Transportation Systems bookings demonstrates our ability to capitalize on the favorable secular trends associated with smart transportation. Now, let's discuss our Roadway Sensors segment. In Q4, the Roadway Sensors segment reported revenue of $11.4 million, representing a 6% year-over-year increase versus the same prior year period. For the full year, the segment's revenue was $43.5 million, representing a 2% decline year-over-year. This decline was entirely attributable to a 12-month delay in the renewal of a cooperative purchasing agreement in the State of Texas, which typically accounts for 25% of the segment's annual revenue. The SmartBuy contract was discontinued on May 31, 2018 and then reinstated and made available for use on May 8, 2019. The reinstated contract remains in effect through November 30, 2019 with three optional one-year renewal periods. In case you're wondering the November 2019 effective date reflects the state's original intention toward the contract no later than November 2018, a deadline the state clearly missed. Based on prior experience and the fact that we've already received request for future pricing information, we have a high confidence level the state will exercise the three annual option periods. As noted on prior calls, notwithstanding the impact in fiscal year 2019 from the SmartBuy contract delay, the segment continued to experience full year growth outside the Texas market with particularly strong performance in Southern California, the Northeast, and Latin America. As a reminder the Roadway Sensors segment had several important product releases over the past 12 months that include first an upgrade to our vector sensor that provides a full suite of signal performance measures, SPM data, and further differentiates Iteris’ SPM, a software-as-a-service offering we've introduced in January 2018. Two, significant enhancements to VantageLive! that included the ingestion of roadway weather data, calculation of average daily traffic, and integration of Iteris SPM. And three, connected vehicle pilots with Siemens, SiriusXM, and a major automobile manufacturer. In Q4, our Agriculture and Weather Analytics segment recognized $1.7 million in revenue, representing a 23% increase versus the same prior year period. For the full year, the segment's revenue was $5.8 million, representing a 19% year-over-year increase. The growth was due to continued strong adoption of ClearAg, our digital agriculture platform and ClearPath Weather. In fact, the segment recorded $6.3 million in full year net bookings, representing a 32% increase from the same prior year period. Recent notable Agriculture and Weather Analytics bookings include a leading crop science company focused in the field of biologics that will integrate ClearAg's environmental intelligence into the crop science companies crop modeling platform; RiceTec, a leading developer of rice seed technology which will use ClearAg's machine learning platform to develop advanced rice seed models. Three, integration solution providers including CropMetrics will integrate ClearAg's environmental intelligence into their respective irrigation solutions offerings; several leading European Allied providers including Hummingbird Technologies, Staphyt Agrosciences, and Dacom will embed ClearAg's API and our visualization components into their respective solutions. FluroSat, an Australian crop health solution provider which will use ClearAg's location-specific environmental intelligence to enhance FluroSat's decision support platform; and Effigis, a Canadian technology company that will ingest ClearAg's environmental intelligence into its fertilizer management platform to help growers better manage their fertilizer costs. In addition to the significant new customer acquisition in fiscal year 2019 we also continued to delight our existing ClearAg customers. And for the year we not only realized 100% revenue renewal rate across our crop science accounts, but we increased our penetration in every one of these accounts. One crop science company even converted its ClearAg contract to a global agreement which provides a potential pathway to our first enterprise deal. Now, let's turn the call over to Andy to walk through our financial results.

Thank you, Joe, and good afternoon, everyone. Okay. Following up on Joe's introduction to our financial highlights and summary of key revenue drivers, I'll focus on providing an update on the three business segments from a modeling perspective and finish with balance sheet highlights. As a reminder, our press release today issued includes financial tables which include current quarter and year-to-date financial information and our pro forma reconciliation and segment information. We also published a key financial metrics document which is posted on our website under our Investor Relations link under Financial Reports which provides a trend view of key financial metrics. Okay. Considering our three businesses. Staying consistent with Joe's order I will start with our Transportation Systems business. Joe outlined our very favorable backlog trends and significant new contract wins. Consistent with past quarters our Q4 year-over-year comp is difficult as our prior year period still has the full scope of the original VDOT TOC contract. That said our Q4 of $12.9 million is within 1% of our prior year figure at $13.1 million. Our total year revenue decline related to TOC dynamic was 8.6%, so we've really made up ground in Q4 and look forward to growth and more favorable comps in our new fiscal year. Current period gross margin of 32.9% is within the range of our expected results. However, it's lower than previous quarters due to a higher than average sub-content component for the segment. Total year gross margins of 32.9% compares favorably to 32.5% for the prior year period. In terms of contribution margin, operating costs of $2.6 million in Q4 are up from our prior year $2.4 million. And for the fiscal year 2019, operating expense of $10.4 million compares to $9.1 million for the prior fiscal year. The increase is attributed to selling expense, which is driven by very robust RFP cycle, which drove the significant increase in the added backlog that we've reported. In all, our increased expense combined with lower year-over-year revenue translates into a decline in contribution margin. Q4 contribution margin of 12.6% compares to 16.6% in Q4 of fiscal 2018. Year-to-date contribution margin of 11.9% compares to 15.9% in fiscal 2018. Our increased operating cost for the segment is not structural. It's primarily driven by an increase in selling expense, which in this business unit is largely a variable expense versus being a fixed expense. Switching to our Sensor segment. As Joe noted, we saw a year-over-year growth in this segment with favorable revenue drivers sets the business up well for a successful fiscal 2020. In terms of the business model, gross margins are primarily driven by product mix. Our current trade gross margins of 40% compares to 43.9% for the previous year period. Our current period gross margins are not typical for this business. Our Q4 is similar to our Q3 in that the current period includes charges to inventory and cost of sales for non-recurring product rework effort. We also have typical year end inventory adjustments that hit cost of sales. Fiscal year 2019 gross margin was 43.6% and compares to 44.8% for the previous year. Looking forward, the business is capable of posting better gross margins in our new fiscal year. Q4 operating cost of $3 million is down from last year's $3.3 million. Total fiscal year operating expense of $11.9 million compares to $11.1 million last year. Looking forward, we expect operating cost for the segment to be stable without a need for significant increase. When looking at contribution margin for the Sensors segment Q4 margins at 13.6% compared to 13.3% for our previous year. Year-to-date contribution margin of 16.1% compares unfavorably to 19.8% for the prior year period. That said, as we expect this segment to build revenue next year and expenses to be stable, we should see improved contribution from this business going forward. Finishing up with our Ag and Weather Analytics segment, Ag and Weather has had a very good year. We have seen four consecutive quarters of vastly improved year-over-year results. We continued with our plan of realizing the leverage the business model presents. This year, we have benefited from increasing revenues coupled with lower operating expense. Joe has covered the revenue drivers, so I'll start with gross margins, which have been a great story this year. Gross margins for Q4 topped 60% for the first time at revenues of $1.7 million. Specifically, gross margins of 60.8% for Q4 compares favorably to 52.2% for the prior year period. Total year gross margins of 57.5% compares favorably to 46.1% for our fiscal 2018. We are very pleased with the segment's ability to leverage even at modest revenue numbers. The segment's contribution loss of $1.15 million for Q4 is a significant improvement over last year's loss of $2.2 million. We just about cut the burn in half this period. Our year-to-date loss of $5 million is likewise a big improvement over last year's loss of $8 million. As we've said, this business is at an inflection point, and we look forward to continued improved financial performance as new revenue wins accumulate. In terms of corporate expense, which includes unallocated public company expense, accounting, finance, IT, marketing, HR, facilities expense and so on we have essentially stabilized given many growth-related transitions. While our quarter and year-to-date expenses are up from last year, specifically our total year expenses of $15.6 million is up from $14.9 million last year much of that variance is due to accounting rules requiring us to capitalize certain efforts related to our fiscal 2018 ERP development. Overall, we feel that our corporate expense is stable and we do not anticipate significant added expense in this area in the foreseeable future. Finally, let me address some unique elements to our balance sheet. In particular, cash is an important topic to discuss. We started the fiscal year at $15.5 million and saw our cash balance dropped to $9 million at the close of the year. During past calls, we discussed the effect that our ERP transition had on our cash position, specifically the knock-on effect to billing and invoicing cycles that occur when you transition to a new system. At this time, we started our new fiscal year with normalized billing and invoicing cycles and have returned to an expected cash balance given our operating loss. We provide a non-GAAP view at the enterprise level to give you a better idea of the cash performance to the business. This fiscal year, our non-GAAP loss of $3.7 million was the key driver to the decrease in cash. That said, we actually are seasonal in terms of cash performance with our period ending March 31 and September 30 each having one extra payroll cycle, which the starts in cash for each period. As we look forward to the new fiscal year expecting revenue growth in all three business segments with disciplined cost management, we feel that our cash balance is sufficient to support our organic growth expectations. At this point, I'll turn the call back to Joe.

Great. Thank you, Andy. So Iteris remains in a strong position to capitalize on favorable secular trends in smart transportation and digital agriculture. And during fiscal year 2020, we will continue to introduce product and service innovations to expand our addressable market and enhance our competitive differentiation, as we further develop highly meaningful high-margin SaaS models in both transportation and agriculture. I'll provide some commentary on our approach by segment and our associated expectations for fiscal year 2020. While bookings growth may fluctuate within any given quarter, the opportunity pipeline for our Transportation Systems segment continues to reach new highs and our conversion rates remain favorable. Therefore, we anticipate the Transportation Systems segment to continue to experience strong bookings through at least fiscal year 2020 with the highest rates of opportunity conversion coming from three areas. First, penetration and strategic geographies, in other words Texas, Florida and the Midwest. Second, customer adoption of our business process outsourcing and managed services offering such as intersections-as-a-service, which is a software-enabled managed service. And third, new feature introductions associated adjacent market penetration and customer adoption of our Software-as-a-Service offerings. As an example, the recent addition of our new international fuel tax compliance service to our SaaS-based commercial vehicle operations platform expanded our addressable market by over $100 million. Likewise, the planned releases in fiscal year 2020 of additional capabilities for iPeMS and Iteris SPM products will further increase our total Software-as-a-Service TAM. Based upon our significant bookings growth in fiscal year 2019 and our expectation for sustained strong bookings, we anticipate the Transportation Systems segment to resume solid organic growth in fiscal year 2020. While we expect the growth to be somewhat back-end loaded due to the timing of the VDOT contract runoff in fiscal year 2019 that will affect first half comparisons, we estimate the segment's full year organic revenue growth to increase approximately 10%. Now let's discuss the Roadway Sensors segment. In addition to the recent renewal of the Texas SmartBuy contract, which I referenced a moment ago, Iteris has also certified our intersection detection equipment for sale through a second statewide contract program named the Texas BuyBoard Purchasing Cooperative. With access to two major purchasing vehicles in the Lone Star State, we believe the headwinds in our single largest market are now behind us and the normalization of commercial activities in Texas will provide visibility to the segment's fundamental growth drivers that will include first several product innovations that will extend the competitive differentiation of our Vantage sensor product family. Second, the implementation of certain programs to enhance the productivity of our direct and indirect sales channels. And third, an increase in product upgrade revenue and also SaaS revenue attributable to VantageLive!, our SaaS-based intersection analytics platform. Based on these factors, we expect the Roadway Sensors segment's full fiscal year 2020 full year revenue to increase approximately 10%. We also expect the segment to demonstrate its normal seasonality with third quarter revenue somewhat depressed due to winter weather, which tends to result in project delays and thus depresses the sales of our products in the period. Finally, let's discuss our agriculture and analytics business. Last year, we repositioned ClearAg from a weather content and scientific modeling technology set to an environmental intelligence and agronomic solutions platform. This new positioning enabled us to first self-align the business owners and functional leaders and target agribusinesses, while minimizing our dependence on a customer's internal IT department. Second, increase our sales and marketing effectiveness due to more repeated delay in our sales cycles. And third, rationalize the ClearAg product roadmap and increase our product development philosophy. In fiscal year 2020, we'll continue to strengthen ClearAg's new market position and increase our overall market share. Our commercial activities will focus on penetration in existing strategic accounts, acquisition of new agricultural equipment and irrigation OEM customers and adoption by allied providers in North America and Europe. We have designed our go-to-market programs to maximize leverage. Therefore, we expect our net investment in ClearAg to further decline in fiscal year 2020, while our revenue growth continues to accelerate. In summary, as we enter fiscal year 2020, we believe the unusual circumstances of simultaneous structural changes to two of our largest customer contracts is now behind us. Therefore, we anticipate full year fiscal year 2020 consolidated revenue growth to exceed 10% and we further expect the combined effect of this revenue growth, margin improvement in our Transportation Systems and Roadway Sensors segments and the continued realization of leverage in the ClearAg business model to yield full year non-GAAP operating income profitability. So, with that, we'd be delighted to respond to your questions and comments. Operator?

Thank you [Operator Instructions] We'll take our first question from Jeff Van Sinderen with B. Riley FBR.

This is Richard Magnusen in for Jeff Van Sinderen. Congratulations on the quarter. We are certainly glad to see SmartBuy reinstated in Texas. You gave us some details on the margin already, but with the SmartBuy issue resolved in Texas, can you offer any more details we can see regarding the margin impact in the second half of the year as we go forward through the year and maybe a little more detail on the product mix that you mentioned?

Sure. This is Andy. I'll get us started on this. Specifically in the sensors business, which is affected by the SmartBuy program when we talk to product mix, arguably the biggest piece that's in play here is the difference between Iteris selling what we consider to be our core products and that includes sales through our third-party distributors of this core product [technical difficulty] which is Iteris selling third-party product. When we look at our last year because of Texas SmartBuy dynamics that mix was 91% core product and 9% third-party product. As we go forward, that may -- that dynamic may switch up a bit to where the Texas distribution piece either walks hand-in-hand and we are at 9% Texas distribution third-party product that could click up. In past years, it's been as high as 11%. To the extent that clicks up, margins will improve from where we sit today just by virtue of some of the product issues I discussed into the -- a typical range for us is more around 44% to 45% should be within expectations, but the variable is going to be how fast that third-party distribution also picks up given the fact that the Texas market now is green pasture again for us in all our different product offerings.

Thank you. And then regarding using Texas as an example, regarding growing revenues from different states or regions, is there anything you can offer regarding your plans to increase sort of geographical diversity of revenue sources? And in this case, I'm talking not just about the Sensors segment, but the company in general?

Yes. Sure. Rich, this is Joe. I'll take that. So first of all, I think that sometimes we manage to confuse people by saying that we're seeing a lot of growth for our Transportation Systems business in Texas, while at the same time we've been saying that our Roadway Sensors business has struggled due to the delay in the SmartBuy contracts. So, first of all, I just want to clarify that the SmartBuy contract is specific to traffic equipment purchasing across the State of Texas. It has nothing to do with consulting services, managed services, or software that we also sell into the State of Texas. So, we're growing -- throughout the past year we grew. Our Transportation Systems business grew in Texas, while our Roadway Sensors business declined in Texas due to the fact that the SmartBuy contract wasn't in place. So, anyway, with respect to geographic diversity, our Roadway Sensors business has tremendous exposure to Texas as we've talked about, but sales products in all 50 states and even internationally, and as I said, we had particularly good results in Latin America this past year. Our Transportation Systems business on the other hand has more geographic concentration. Today, we have a high degree of concentration in -- along the Pacific Coast particularly doing a lot of business in California. We also do a lot of business in the Mid-Atlantic, in particular a lot of business in Virginia. That's not to say we don't do work in other parts of the country which we do. That being said, we have identified a growth market for our Transportation Systems business unit. There are three primary strategic markets for us at this time. Texas is one. Another is Florida. Florida arguably has the fastest-growing rate of investment in transportation infrastructure, and that's due to the general strength of the economy in Florida and also population shifting from the northern states into the sunbelt and particularly a lot of growth in Florida. Also Florida makes extensive use of toll roads, and therefore, they've got dedicated revenue streams, which they're able to plow back into the further development of transportation infrastructure. And as a result, they're recognized as leaders in the transportation infrastructure market today. The third strategic geography for us is the Midwest. We've talked about that in prior calls. We've always participated in the Midwest market, but somewhat opportunistically. In the third quarter this year we stood up a dedicated office in the Chicagoland area and we continue to see a lot of growth in that region, and we expect to continue to focus on that region through FY 2020 and beyond.

All right. Thank you very much. I’ll get back in the queue.

We'll take our next question from Mike Latimore with Northland Capital Markets.

Great. Thanks a lot. Congratulations on the strong results. In terms of this new SmartBuy contract, does that act as an accelerant to the Roadway Sensor business? Or is it -- how should we think about that as you've already -- as you mentioned you had this other contract and you're starting to see good trends there on that other contract. So is this sort of incremental or does it spread -- Texas is just healthy overall?

Yeah. So, I think the headline is that Texas is healthy overall. One of the reasons that we saw a bit of a resurgence in the Roadway Sensors business in Q4 was actually because we had managed to put in place the second purchasing agreement, which I mentioned which is the Texas BuyBoard agreement and even before the SmartBuy contract was renewed effective May 8th. So, now we had the benefit of both of those statewide purchasing agreements, and we would expect to resume normal business in Texas. There's a possibility there could be some upside on that, but our expectation is rather that we'll resume normal course of business.

And then on the corporate expense comment when you say it's stable, is it stable as it relates to the fourth quarter level or on an annual basis?

On an annual basis, and the one caveat that I always throw out there is just basic wage inflation. Obviously, we're in a very competitive market and across all of our geos right now. And so obviously, when we consider basic inflation that's primarily driven that wage structure. And when it comes down to the other dynamics such as some of the key drivers, health insurance and insurance markets and whatnot, we've done pretty well. But again, across the board, you always have to build in let's say a 3%, 4% type increase and that's essentially running flat.

Got it. And then for the full year, how much -- what percent of your revenue if you go across both transportation and ag, what percent was Software-as-a-Service or managed service based on your software? And I assume you expect that to grow pretty well this year?

Yeah, we do. So our recurring software revenue was in the range of about $20 million perhaps just a little bit shy of that or just a little bit below 20% of our total revenue. Software will be our fastest-growing product category and we would definitely expect rate – so I was – with double effect the rate of growth on our software-related products in total to be substantially more than 10%. We have previously said that over a 3-year period, we're expecting our software-related revenue to grow from approximately 20% of our total revenue to as much as 30% of our total revenue at the end of the 3-year period.

Okay. Thank you.

We'll take your next question from Steve Dyer with Craig-Hallum Capital Group. Please go ahead.

Hey, guys. Ryan Sigdahl on for Steve Dyer. As it relates to the Texas SmartBuy program have you guys seen pent-up demand over the past month since it was approved? And if possible can you quantify the contribution from that in April and May here?

So yes, we have seen a lot of pent-up demand and we had a strong quarter in Texas that we actually met our plan in Texas for the first time in Q4. Just so you guys have some background there it's been -- the second program that I mentioned the Texas BuyBoard program which was put in place and was therefore a mechanism for some purchases in Texas in the fourth quarter, not only requires – required us to get certified under that program, but also to then essentially market that program to our end customers some of whom did not traditionally buy under that program. So it wasn't like everyone just immediately flocked to it. There was a lot of work that had to be done over the course of several months. And at this point we feel like people are comfortable purchasing through that. The reason that I mentioned that is because it's been a gradual process. Once we got certified under that second program to educate our customers and bring them on board and we started to see purchases now coming through that mechanism and we actually hit our forecast in Texas for the first time. So that's all good news. What's unclear to us now is what -- if everything has gotten through the pipeline or whether there's still a lot of stuff in the Q that could come through the pipeline rather rapidly now that the SmartBuy program is in place. At this point, we see things looking more normal, and so our expectation, as I said previously is that the business will normalize as opposed to seeing like a huge burst of activity. Besides the fact that we've had to reeducate customers and it's been going on now for a while which kind of modified any unusual burst of activity, the other thing to keep in mind, if you talk about it quite a bit is that there are constraints on our customers' part. They can only consume so much product at any given point in time because they have limits in terms of how many project teams they have available to deploy our technology. So I think the question is, like you expect to see a huge increase in sales in Q1 or Q2 due to pent-up demand. And what I'm trying to say is probably not due to a couple of the factors that I mentioned. But that being said we feel very confident that business will resume normal behavior, we'll see normal patterns in Texas now going forward.

Great. That's helpful. One more for me then I'll hop back in the queue. As it relates to ClearAg, any impact from the trade wars here causing uncertainty? And it seems like there's delayed investments and cautious spending across the Ag industry. Any impact there that you're seeing? Thanks.

Yes. So, it's a great question. And to be honest with you, we're very disappointed by the continued tariff situation we find ourselves embroiled in. As I think everybody knows, the agriculture sector has struggled candidly for the last three or five years due to low commodity prices for -- particularly for row crops. In addition to that and arguably partly due to that though you've seen a lot of consolidation among agribusinesses, in a lot of instances the consolidation is driven by efforts on their part to reduce their cost structures because their end customers have limited spending capability. And so they're seeing a lot of price pressure for the inputs that they sell to those growers. And so it's kind of rippled all the way through the value chain. And as we've talked about in the past, we haven't necessarily seen price pressure for our products, but we have seen sales cycles get delayed as a result of people trying to kind of get to some point of equilibrium in this frankly pretty chaotic period that we've operated within for the last three years. So our desire would be to see a normalization of trade which would obviously be a really good thing for us. But anyway, our current expectations, actually reflects modest continued chaos for the next 12 months and our expectation would be beyond that we would see a normalization.

Great. Thanks guys. Good luck.

We'll take our next question from Joseph Osha with JMP Securities.

Hello there.

Hello.

Hi. I wanted to return if I could to a comment I think Andy you made it on your prepared comments about smart Ag more broadly saying that you expect the net investment in the business to decrease. I wanted to drill down to that a bit. I believe you had also said that we could expect the operating cost run rate for that business to essentially be flat here at March quarter levels. Is that correct?

Sure. So let me go ahead and address those pieces here. Again, a reminder that the whole segment is essentially a SaaS business. Joe has talked to a number of the great wins that we've had and really the name of the game right now is customer acquisition and expansion within the existing accounts, another great metric out there 100% customer renewals. So we're in the right spot. But when it's all said and done, the GAAP recognized revenue built slowly because again it is a pure SaaS business. Now having said that, we expect that segment to grow faster than the other two, it's just in a higher growth dynamic right now as a percentage of revenue. When it comes to expenses, we feel very good about the structure that we're in. When it comes to G&A and R&D, we expect basically just inflationary effect on those two areas, meaning that 3%, roughly 3% to 4% increase in cost. Sales and marketing, we're going monitor as we go through the year. Basically we had a baseline and we may based on demand choose to throttle that up depending on opportunity, but that would be the only area. But all said and done between the increase in revenue even despite the fact that it's a slow revenue recognition cycle, we will show a lesser burn in this current fiscal year than last year. So we will show improvement regardless of these dynamics.

Okay. And given how the positioning of the business has evolved, it's probably not reasonable at this point for us necessarily to think about of a sort of onetime step up as a result of an enterprise agreement. Is that still hovering out there? Or should we not be thinking about that at this point?

It is absolutely hovering out there. We have a number of very, very large agribusinesses that continued to talk to us about potentially entering into an enterprise agreement. And as we said before, if that were to happen and we would see a significant increase -- and rapid increase in our ClearAg revenue. The -- as Andy said, we expect to actually more modest growth than that, but still significant increase in growth. As I said previously, our bookings growth was in the low to mid 30% in FY 2019, and I think that's a very good indicator as to what the revenue growth ought to be in FY 2020 actually due to the fact that it is a SaaS model as Andy has made a point. So, we definitely anticipate revenue acceleration in FY 2020 even without an enterprise agreement which would be significant upside against the current expectation.

Okay. And then the last one for me. As regard some of the comments on cash and liquidity, just looking at the March quarter, it does seem like the receivables popped a little bit and there might have been -- some of this decline in cash might have been just working capital over-weighted. Might we see some of those working capital accounts swing back the other way in the June quarter and perhaps take a little pressure off that cash balance? And that's it for me. Thanks.

Sure. So, Andy, again, yeah, they are very perceptive. We had a really nice bounce back in Sensors, again they're up year-over-year. Systems had a great period as well. That drove AR up. And one dynamic that's probably true for all of us tech companies for whatever reason the lion's share of the sales come in the third month of a quarter. So that tends to pop. When you consider us from an enterprise perspective, our Q2 and our Q4 are our strongest quarters. And so next quarter still we will -- it's a strong quarter for us. If anything, the working capital comes back in terms of a Q3 which is, let's say, a lesser quarter, because at that point then seasonally we're down in sales versus the other quarters. So, as we look forward, I think again, since we've got the pressure taken off of us in our two key transportation markets, we're going to still be building. So, we might actually show cash decline over the periods as we take on these new orders which are basically across the gamut increasing working capital demand, but it will be a high class problem. Any which way you cut it though we absolutely have sufficient cash to manage the organic growth we expect.

Okay. Thank you very much.

[Operator Instructions] And at this time, I'll turn the conference back to management for any additional or closing remarks.

Super. Thank you, operator. I appreciate that. And we appreciate everyone's support and also the good questions today. We look forward to updating you again on our continued progress and when we report our results for our first quarter FY 2020 in probably just a few weeks. It comes fast and furious. But anyway with that, we'll conclude today's call. Thanks again.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation.